Capability Centres: India rules for foreign companies

Designing a centre that lasts

Captive centres grow quickly, and the tax model should be designed for the centre the group expects in three years, not the first ten hires. A routine cost-plus model fits support work; centres that own products or take decisions may need a different return.

Exports of services are zero-rated for GST when conditions are met, so the centre files a letter of undertaking and claims refunds of input tax. Refund processing is document-heavy and benefits from monthly reconciliation.

IP created in India should be assigned to the parent in employment and intercompany contracts. Without clear assignment, ownership of software and inventions can be disputed later.

Design checklist

• Functional analysis and markup.
• IP assignment in employment and intercompany contracts.
• LUT and export refund process.
• Authority limits for parent staff.
• Payroll set-up for fast hiring.

Checklist

• Functional profile and markup
• LUT and refund process
• IP assignment
• Authority limits
• Payroll for scale

Common mistakes

• Routine markup for a decision-making centre
• Refund claims without reconciliations
• No IP assignment
• Parent staff directing day-to-day work

How this applies to your country

• USA to India en-US
• UK to India en-GB
• Japan to India en-JP
• Germany to India en-DE
• Singapore to India en-SG
• Australia to India en-AU
• China to India en-CN
• Hong Kong to India en-HK
• Russia to India en-RU
• Spain to India en-ES
• France to India en-FR
• UAE to India en-AE

Our service: Global Capability Centre